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Implementing sustainability, sustainably

February 27, 2023

Sustainability’s breadth of activities increase as consumers look to companies to take the lead. By Telus Consumer Goods Customer Director APAC, Luke Pocock

Article courtesy of Telus Consumer Goods

Climate change is currently the number one concern for one in eight Australians, with 43 per cent concerned about the environmental impact of ecommerce and 62 per cent agreeing retailers should remove single use plastic bags from checkouts1.

A 2021 global study of more than 10,000 respondents found that 60 per cent considered sustainability in buying decisions, and 63 per cent in consumer goods2.

Granted, there remains a ‘say-do gap’ between what consumers are concerned about and the actions they subsequently take. Examples include the 41 per cent who claim recyclable packaging is important to them versus the 26 per cent who acted on this in the past month. Or the 40 per cent for whom low-environmental-impact product is important versus the 22 per cent acting on it recently3.

However, consumers look to businesses and government to take the lead in sustainable actions and activities. Two thirds (68 per cent) of consumers agree that if businesses in their country do not act now to combat climate change, they will be failing their employees and customers4.

Sustainability moves beyond packaging

(But it’s still a big part of it)

Sustainability has become part of the broader ethical commerce agenda, along with corporate social responsibility (CSR); environmental, social and governance (ESG), and fair trade. From an FMCG standpoint this covers everything from operations and labour; supply chain, warehousing and power use; transport and delivery through to product and packaging.

You could also argue that tactics such as price promotions could fall under the ethical commerce umbrella since some may generate unnecessary demand and create waste through consumer stockpiling, particularly in categories with non-expandable consumption, such as laundry detergent. It may be that in order to reduce consumer waste, encouraging just-in-time purchasing rather than stocking up is required; something that flies in the face of traditional volume-generation thinking. Further, advanced planning tools such as stock forecasting, trade promotions management and optimisation software and supply chain management systems, including order management and warehouse management, can help optimise inventory levels whilst reducing waste.

Some of the world’s largest FMCG companies have committed to reduce packaging waste through more recycling, reducing plastics usage, increasing the use of alternatives and new materials, and influencing consumer behaviour. Nestle, for example, has committed to using 100 per cent recyclable or reusable packaging by 2025. Retailers such as Walmart, Kroger and Loblaws have partnered with Loop for refillable packaging. Some are beginning to investigate ‘buyback’ programs, where retailers and companies buy back packaging from consumers for recycling or reuse. Rather than the now-defunct RedCycle model, this requires a ‘reverse logistics’ program integrated with sales and distribution networks.

All of this obviously comes at a cost, putting pressure on revenue growth management. In one LEK consulting study, 75 per cent of brand owners surveyed reporting planning to spend more on packaging over the next year. And the increased spend is one of the corporate barriers to implementing sustainable packaging and other initiatives.

Elsewhere, green shoots come in the form of blockchain’s provision of visibility and traceability. Given that consumers can theoretically see this information by scanning a product’s QR code, more needs to be done to communicate the ease of accessing sustainable product information. This would fall under the ‘influence consumer behaviour’ remit mentioned earlier.

Carrot, stick or both?

There are some upsides. Theoretically, increased consumer spend per product is one. Given that packaging accounts for half the global total of plastic waste, more than 70 per cent of sustainability-focussed shoppers are willing to pay 35 per cent more for ‘eco-friendly’ packaged goods5. Another study indicated that 50 per cent of FMCG growth in a five-year period came from sustainability-marketed products6.

The aforementioned packaging buyback programs enable brands and retailers to reward and recognise consumers participating in the program thus strengthening consumer relationships.

Then there’s share market performance benefits. A Harvard study indicated that companies achieve the highest stock returns when focusing on material, metrics-driven ESG activities related to operational and financial performance7.  

On the other hand, some are beginning to wield the stick, or provide disincentives for non-compliance. In the UK, companies who, in a 12-month period, manufacture or import more than 10 tonnes of plastic packaging containing under 30 per cent recycled plastic now have to pay a Plastic Packaging Tax. Further ESG regulations and penalties are expected.

Removing barriers and creating change

The main items on the FMCG sustainability agenda are embracing circular economy principles, lightening the packaging burden whilst producing higher quality products, and ensuring supply chain visibility and traceability. This last requires correctly forecasting inventory through the use of analytics.

The principles for creating consumer behaviour change can be used to initiate business change. That is, focussing on the actions that people and businesses are already inclined to do, and promoting the benefits of these actions over the sacrifices required. And shouting about the benefits, activities and results long and loud enough that they and the related behaviours are perceived as the norm.

Sustainability is a consumer expectation, not a point of difference or positioning statement. It’s becoming a cost of doing business. The trick is in reducing that cost; in making sustainability and ethical commerce financially sustainable.